The Rush for Coal: Are Price Increases Coming

Specifically, how India's need for thermal coal imports is going to tighten this market, both in terms of prices, and bids for coal deposits within shipping distance of Asia.

India simply doesn't have enough coal. As of yesterday, one-third of the nation's coal-fired power plants were running at "critical" levels of coal stocks (meaning less than seven days of supply). And 10% are at "super-critical", with less than four days of stock.

I've been on this theme for about six months. And finally some of the signs of India's "dash for coal" are starting to appear.

First, buy-outs of coal deposits. Last week, Canadian-listed coal developer CIC Energy received a $400 million takeover offer from a "multi-billion dollar Indian conglomerate". CIC is moving forward the Mmambula coal field in southeastern Botswana (thanks for the heads-up, Saee).

India is even getting active in the junior side of the coal business. This week India's Bhushan Steel announced its intent to buy a stake in Bowen Energy, an Australian coal explorer and developer with projects in the Bowen Basin.

Then there's the signals from the coal market itself. This week, the chairman of the Indonesian Coal Mining Association told attendees at the Coaltrans Upgrading Coal Forum in Jakarta that India will pass Japan as Indonesia's biggest coal export customer by 2011.

"In the past, India only bought high-quality coal, but now they started buying a lot of low-rank coal also because of an increase in domestic consumption," chairman Bob Kamandanu said. He predicted India's coal imports from Indonesia will rise to 70 million tonnes, up from 40 million tonnes this year.

In addition, Bloomberg reported this week that traders handling Richards Bay, the biggest export port for South African coal, believe rising demand from India could push coal prices at this locale to a two-year high.

The piece also quoted T.K. Chatterjee, procurement manager at Indian power major NTPC, as saying, "India will be importing in a big way... This will lead to an increase in prices."

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The levels are dire. I have seen it first hand myself. India have had opportunities to buy for some time now, but seem to have hessitated. This has been there main mistake. They will never really sort out their internal issues for local coal deposits for ages. They need a heavy block of coal rapidly, but the 2013+ forecasts are dire. The only near term producer that could cool the gapping ucler. The only real one with major potential I see is Churchill Mining / PT Coal Development group. At 35m tonnes that will give them something to chew on. Even that will take a couple of years. They really need to BUY and stop WATCHING. Nice article